Google's Andy Rubin (pictured) is accused of conducting "brazen" infringement of Oracle Java intellectual property on behalf of his employer, as evidenced by a 2005 email in which Rubin, seems to acknowledge that Google may be sued. (Source: Stephen Shankland/CNET)

Oracle wants to milk a lucrative licensing settlement out of Google, as well as damages. While a big damages payday was hurt by the recent ruling, the chances of Google being forced to licensed appear to have increased. (Source: Reuters)

Google scores a win, though, in reducing damage amount from $2.6B USD

Oracle Corp.'s (ORCL) efforts to milk billions of dollars in damages out of Google Inc. (GOOG) were likely stymied last Friday, when U.S. District Court Judge William Alsup partially granted a request by Google to throw out Oracle's $2.6B USD in proposed damages.

The suit [Scribd] dates back almost a year to August 12, 2010. Oracle accused Google of infringing upon its intellectual property, based on certain files contained within Google's popular Android operating system. Namely, Android was accused of using source code from the Apache distribution of Java, which did not properly license the Java-related intellectual property of Sun Microsystems. Oracle acquired Sun on January 12, 2010 after a process initiated in April 2009.

Surprisingly, Google did not counter-sue. And Google seemingly admitted to knowing that the Apache code was in violation. However, Google complained that Sun's intellectual property was overly generic and that Sun (and later Oracle) were being anticompetitive in trying to charge prohibitively large licensing fees.

So far, the courts have likely supported Google on the former claim. Approximately 90 percent of the Oracle patents examined were ruled invalid, on par with the standard for patent litigation.

However, on the latter claim -- that Oracle is being unfair -- Judge Alsup was unsympathetic. He quotes a 2005 email from Android chief Andy Rubin, who writes [Scribd]:

If Sun doesn't want to work with us, we have two options: 1) Abandon our work and adopt MSFT CLR VM and C# language - or - 2) Do Java anyway and defend our decision, perhaps making enemies along the way

This would be a Soviet-style negotiation: "What's mine is mine and what's yours is negotiable."... The test is not what the infringer actually bargained for but what reasonable parties would have negotiated. Google may have simply been brazen, preferring to roll the dice on possible litigation rather than to pay a fair price.

While the ruling was generally supportive of Oracle, it makes one very significant stance against the technology giant. Namely, it dismisses Oracle's theory that since parts of Android are accused of infringing, that all of Android is effectively infringing. Rather, Judge Alsup writes, the relative value of the potentially infringing parts must be the basis of the damages -- not the value of Android as a whole.

The good news for Google is this means it likely won't have to give a windfall payout to Oracle. Oracle can try to come up with a revised damages claim that's higher, but the company's prospects of being award over a billion in damages appear to be dwindling.

The bad news for Google is that the language of the ruling is generally very unfavorable for it. Thus if Oracle prevails, while it may only obtain a small settlement, it may be able to obtain an injunction preventing the sale of all Android handsets. This would force Google to pay likely large licensing fees to Oracle, on top of the fees its partners already pay or are being pressured to pay to Microsoft Corp. (MSFT).